Service tax arrears triple to Rs 71K cr in 2 years: CAG

Service tax arrears more than tripled to Rs 71,257 crore in 2014-15 within a couple of years, apex auditor Comptroller and Auditor General (CAG) said on Friday, expressing concern that the recovery is not being given due importance.

The arrears of service tax were at Rs 22,014 crore in 2012-13, it said.

The CAG added however that recovery last year, as percentage of "unrestrained recoverable arrears", registered a steep fall from 42 per cent during 2013-14 to 10 per cent in 2014-15.

Service tax collection was Rs 2,11,145 crore in 2015-16 and accounted for 29.77 per cent of indirect tax revenue, CAG said, adding that "manpower recruitment services, which was at third position in 2014-15 became top service revenue paying service in 2015-16 followed by Telecommunication and General Insurance Premium services".

 

It pointed out that adjudication cases involving service tax implication of over Rs 76,124 crore were pending finalisation as on March 31, 2016.

Observing that the success ratio of department's appeal against adjudication order has decreased to 25.52 per cent in FY16 from 32.69 per cent in FY14, the CAG said the Finance Ministry could not provide complete data related to detailed scrutiny of returns, internal audits and disposal of refund cases for 2015-16.

"Poor maintenance of records by a wing which is backbone of the compliance verification mechanism reflects poorly on the functioning of the department," it said.

It observed instances of non-payment/short-payment of service tax, incorrect availing/utilisation of CENVAT credit and non-payment of interest on delayed payments having the financial implication of Rs 138.22 crore.

It also pointed to deficiencies in scrutiny and internal audit carried out by department officers, delayed issue of show cause notice etc, having financial implication of Rs 118.66 crore.

CAG said the recovery of arrears is not being given due importance despite mounting arrears.

Adjudication is the process through which department officers determine issue relating to tax liability of assessees. Such process may involve consideration of aspects relating to inter alia, CENVAT credit, valuation , refund claims, provisional assessment etc.

A decision of the adjudicatory authority may be challenged in an appellate forum.